Chartered Institute of Taxation comment on Land and Buildings Transaction Tax (LBTT) announcement

The Chartered Institute of Taxation has commented on the Scottish Government's plans to increase the threshold for Land and Buildings Transaction Tax (LBTT) from £145,000 to £250,000.

Joanne Walker, CIOT Scottish Technical Officer, said:

“There is a risk that by not increasing the threshold immediately, people will put off buying a house until the tax change takes effect so that they can benefit from today’s announcement. It will be important for the Scottish Government to set out quickly when these changes will take effect to prevent the housing market stalling in its recovery.

“Once implemented, the changes will mean that an additional 34 per cent of transactions will be taken out of LBTT, taking the total to 79 per cent. This will generate a maximum saving to taxpayers of £2,1001.

“That said, it remains the case that across the UK, there is still some uncertainty over who gains from a change of this kind. A 2011 UK government study found that previous cuts to help first-time buyers were mostly absorbed in a higher house price, benefiting sellers rather than purchasers2”.

Notes:

1.  A transaction with a value of £250,000 would have generated a tax liability of £2,100, with a rate of 2 per cent applied to the amount of the sale above the zero rate threshold of £145,000.

2.  See Government research casts doubt on effectiveness of stamp duty cut for a link to the report in question (CIOT press release – 22 November 2017)

3. The CIOT looked at the tax liabilities (excluding ADS) for residential property transactions in Scotland covering the period April 2019 to March 2020. The relevant figures are shown in the table below and can be found here https://www.revenue.scot/about-us/publications/statistics/datasets.

LBTT transactions (April 2019 - March 2020)